Wednesday, July 22, 2009

Starbuck’s business has always been about an exceptional service experience revolving around a high-quality product. Recently, it has engaged in refocusing on that core experience to create differentiation between its offering and the down-market competition.

Years of focus on efficiency of the operation resulted in a quality / productivity conflict that Starbuck’s is still working through – most famously when they closed retail locations across the country to deliver a service operations message that was, essentially, “slow down”.

An element of their experience that also deteriorated as they grew was the quality of their baked goods. When I first started going to Starbuck’s, they had the flexibility to source baked goods locally. Luckily, I was treated to Starbuck’s coffee and bagels courtesy of Victoria, BC’s amazing Mount Royal Bagel Factory. As they grew, the inefficiencies of this sourcing method and the inconsistency of the experience caused them to shift to a national menu. Of course, baked goods are less transportable and less consistent to local tastes than coffee, so the pastry section has became an weak spot in an otherwise high-quality experience.

As another indicator of their continued service improvement, they focused on the baked goods, one of the aspects of the experience that would show tangible proof of their efforts.

The launch for the improved pastry line was a national “Free Pastry Day” promotion, where any customer ordering a coffee product would receive a free pastry until 10:30 AM, to incite trial and spread the word as quickly as possible about the new pastry line while continuing to sell higher margin coffee.

I asked Baristas at three locations how “Free Pastry Day” went. An indicator of how seriously the retail operations are at Starbuck’s, each location had very definite answers. One store gave away 143 pastries, the next 312, and the 3rd 186. All said they stocked out that day. In two instances from today, the respondent said that pastry sales were still up noticeably from pre-launch. In one societally affirming comment, my usual Barista said, “it’s the second busiest day I’ve ever been here for, right behind ‘Free Coffee for Voters’ day”.

Quantitatively, the jury is still out on the new line. The Starbucks "Ideas in Action" Blog is roughly 65 / 35 with appreciative customers compared to those that went to stores with operational difficulties. The fact remains that Starbuck’s knows what they’re doing at improving the experience. Their “slow down” initiative struck at the core of the service experience (the starting place in any improvement initiative), while the pastry relaunch targets a significant tangible element of the service, making it most likely for customers to perceive a noticeable improvement. If you’re a Starbuck’s patron, what do you think they should target next?